Bombshell Move by USPS to Slam Big Shippers: Get Ready for Skyrocketing Delivery Bills

The U.S. Postal Service is ending discounts that shipping consolidators such as UPS and DHL use to get packages to the nation’s doorsteps, in a move meant to help the Postal Service slow losses but that could see the higher costs passed on to consumers.

For decades, shipping consolidators have enjoyed discounted rates from the USPS for the final leg of package delivery, also known as the last-mile delivery. This mutually beneficial arrangement allowed the shipping consolidators to offer competitive pricing while still turning a profit, while the USPS was able to capitalize on the increased volume.

However, the rising losses incurred by the USPS in recent years have forced the organization to rethink its pricing strategy. With a mandate to be self-sustaining, the USPS has been under immense pressure to reduce its costs and increase revenue. In 2022, the USPS reported a net loss of $6.7 billion, bringing the total losses since 2007 to over $100 billion.

One of the key contributors to these losses has been the mandatory retirement funding obligations imposed on the USPS by Congress. These obligations require the USPS to prefund retiree health benefits by $5.5 billion annually, putting a significant strain on the organization’s finances.

By ending discounts for shipping consolidators, the USPS aims to increase revenue and stem the losses. The organization will now charge shippers the same last-mile delivery rates that individual customers pay. This change is expected to take effect in the coming months, although a specific date has yet to be announced.

Industry experts warn that the higher costs will be passed on to consumers, potentially increasing the cost of online shopping and other delivery services. Shipping consolidators such as UPS and DHL will struggle to absorb the higher costs, leading to increased prices and lower profit margins.

This change comes on the heels of various efforts by the USPS to modernize its operations and improve efficiency. In recent years, the organization has invested heavily in self-service kiosks, same-day delivery options, and streamlined logistics systems.

The decision by the USPS to end discounts for shipping consolidators has significant implications for consumers, businesses, and the overall economy. While the organization’s efforts to increase revenue and reduce losses are understandable, it is essential for policymakers to consider the broader impact of these changes on the economy and the marketplace.